COLUMBIA — As Columbia and Boone County continue to struggle with lagging sales tax revenue, there’s growing sentiment that it might be time to revisit an idea already rejected twice by city voters — imposing a tax on purchases made online and out of state.
Supporters say this kind of revenue source, called a "use tax," would generate millions of dollars, make competition between local and out-of-state retailers more fair, and apply only to those who spend more than $2,000 online or outside Missouri.
Talk of a use tax resurfaced during a Sept. 30 dinner attended by Boone County commissioners and officials from Columbia and other towns in the county, and it popped up again at a meeting of Columbia and county officials a couple months later. A committee will be appointed early this year to study the idea.
The limping economy has been rough on Columbia and the county, both of which rely heavily on sales tax to finance their budgets.
Boone County Auditor June Pitchford said a use tax would "be good for business and good for the county.” She added that it would remove the competitive advantage out-of-state businesses enjoy and, in turn, keep more money in the state.
Boone County Southern District Commissioner Karen Miller called it a "fairness tax."
“Internet businesses ship their goods across the public roads, expect fire and police protection but don't add to the tax base to be able to support these services,” she said.
Miller said it would make sense for Boone County, and the cities and towns that have sales taxes, to put it on the ballot. Fifth Ward Columbia City Councilwoman Laura Nauser agreed.
“If it moves forward, I think there will be several other cities … participating in that,” she said. “Even before the downturn in the economy, (municipalities) were starting to see a decrease in sales tax revenue.”
Nauser said the City Council has talked briefly about a use tax, which she said would make competition “fairer across the board.”
Still, it’s one thing to talk about a use tax and quite another to get it approved by voters. The city of Columbia has put a use tax on the ballot twice: once in 1996 and again in 1998. Voters rejected the idea soundly both times.
Miller said that while she generally favors a use tax, she wants to proceed cautiously.
“I am only (for putting it on the ballot) after it is fully vetted, where we can answer the questions we ourselves may have through the committee process,” Miller added.
Although use taxes are essentially sales taxes, they work a bit differently.
“Unlike sales tax, which requires a sale at retail in Missouri, use tax is imposed directly upon the person that stores, uses or consumes tangible personal property in Missouri,” according to the Missouri Department of Revenue’s Web site. “Use tax does not apply if the purchase is from a Missouri retailer and subject to Missouri sales tax.”
The responsibility of remitting use taxes falls to the consumer. But not everyone who buys a pair of shoes or a book online would have to pay the tax. Only those who spend more than $2,000 a year on merchandise from the Internet or out-of-state vendors are affected.
Officials from Missouri counties that have use taxes applaud them. Leslie Ensign, a spokeswoman for Clay County, which includes northern Kansas City, had nothing but good things to say. Clay County's use tax, which was approved in 2001, was expected to generate nearly $3 million for 2009.
“Our use tax is extremely important for our county,” she said. “Across the board our revenue is down. … Overall we’re seeing about a 10 percent decrease (in revenue).”
“Quite honestly, without that use tax … we would have had lots of projects that would be canceled,” Ensign said. She cited a popular 23-mile paved trail that she said wouldn’t exist without the use tax.
“I could give you probably hundreds of examples of projects that wouldn’t be done (if we didn’t have a use tax),” she said.
In Cass County, just south of Kansas City, a use tax passed in 2008 by a "very close margin," County Treasurer Steve Cheslik said. He estimated it would generate $1.2 million by the end of 2009. General sales tax, he said, was down about 7 percent last year.
"Without (the use tax) we'd really be feeling the effects of the economic downturn,” Cheslik said. "(But) we're stilling seeing a budget downfall." Still, Cheslik opposes the use tax.
"When push comes to shove, $1.2 million isn't in the consumers' pockets," he said. And often, it's businesses, rather than individuals, that pay use taxes. When businesses’ tax bills rise, they pass the cost to consumers.
"I think it might actually slow things down," Cheslik said.
In Cole County, which includes Jefferson City, sales tax revenue is down about 6 percent, County Finance Director Debbie Malzner said. Cole County voters approved a use tax in 1996, the same year the Missouri legislature passed a law saying use taxes would be subject to ballot approval.
The use tax was on track to generate $810,000 for Cole County in 2009. "It's extremely important," Malzner said. “It's just been great.”
In Platte County, northwest of Kansas City, use tax pumped more than $4.4 million into county coffers last year. Platte County Presiding Commissioner Betty Knight called the tax “essential” in a county where regular sales tax revenue was down 4.4 percent from 2008.
Platte County imposed a use tax in 1995, then had to put it to a public vote in 1996. "It passed pretty easily," Knight said.
Since the use tax was put in place, Platte County officials have been able to reduce their property tax levy from 17 cents to 2 cents per $100 assessed valuation.
"It takes the burden off of property … owners who are having a hard time right now anyway," Knight said. "It's kind of a way to give back to property owners."
Most of Missouri’s 114 counties have no use taxes. Greene County, which includes Springfield, is one of them, even though sales tax revenue fell 8 percent in 2009. Greene County voters rejected a use tax in 1996.
“It’s tough out here,” Presiding County Commissioner David Kunrod said. “We’re giving some thought to revisiting (a use tax) in the near future.”
Officials in Jefferson and Jasper counties told the Missourian they are considering use taxes. In Buchanan County, however, voters have already rejected the idea twice and officials have no plans to ask again.
Cape Girardeau County in southeast Missouri also lacks a use tax, and County Auditor David Ludwig likes it that way. Even though sales tax revenue is down 2.6 percent, Ludwig said the county simply will have to ride out the tough times like everybody else. A new tax, he said, “would be the absolute last step."
"It's not all doom and gloom. There's going to be a bright spot," Ludwig said, guessing the economy will rebound late this year. "It's running in cycles. ... This one is a multiyear cycle. ... It's a building process."